The goal is for your 529 to cover the tuition, books, required expenses.
I recommend:
1098T box 1 does not include room and board, only qualified tuition expenses.
1098T box 5 can be partially allocated towards the room and board of $3,192. This leaves $10,098 towards college expenses
Back to box 1 $20,124 -10,098 scholarship = $10,026 on the 1098T plus any extra expenses, books, paper, whatever else was required to attend. My guess is you have a few more expenses and your 529 does completely cover your college expenses. IF your 529 is completely used for qualified college expenses, you do not even need to enter it.
Your son would then have taxable scholarship income of $3,192. Since the first $12,400 of income is not taxed, that is not a burden. Even if it is taxed, the rate would be very low vs your tax rate and you taking the hit and filing with the income as taxable to you via the 529.
@Jill21
I am also going to recommend you look at another of my answers for help. It will show you more options.
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